§ Mr. Pardoeasked the Chancellor of the Exchequer what is the maximum annual increase in pensions beyond retirement to compensate for inflation which a private pension scheme may now fund and still obtain full tax advantages under current Inland Revenue regulations, and when this was last fixed.
§ Mr. Robert Sheldon, pursuant to his reply [Official Report, 9th December 1975; Vol. 902, c. 112], gave the following information:
Private pension schemes may, within the Inland Revenue rules for tax approval, fund in advance at a reasonable level in relation to the pension benefits to be provided. Under the "new code" of tax approval introduced in 1970, pension schemes may provide for cost-of-living increases in pensions in payment to the full extent necessary to reflect rises in the cost of living after retirement; Inland Revenue rules impose no specific limit on the rate of increase 256W in the cost of living which may be assumed for the purpose of funding the pension increases so provided but require that it must be reasonable in the light of long-term trends in the cost of living. Schemes which have not yet changed over to the "new code" of approval—as all schemes must by April 1980—were required at their commencement to adopt rules limiting cost-of-living pension in creases to a rate not exceeding 2½ per cent. annum and may fund only at a reasonable level in relation to the pensions, as so limited, for which the scheme provides.